Put Stock In This: Market To Fluctuate

Wow! Here it is the middle of September, and we haven`t had a stock market crash yet.

Are we lucky, or what?

The question isn`t as facetious as it sounds. September is a dangerous month.

According to some stock market research, September is the month when the market is most likely to decline. Since the beginning of this century, the market has gone down an average of 1.1 percent in September.

October is the month most investors fear, but apparently October has been getting a bum rap. The average October downturn has been only 0.2 percent.

But averages can conceal.

Remember the October 1987 stock market crash, with its terrifying one-day drop of the Dow Jones industrial average by 508 points? Others may remember the equally terrifying days of October 1929 and the smaller crashes of 1932, 1937 and 1989.

The only significant September crash came in 1931. The research comes from Ned Davis, president of a Florida research firm that carries his name.

Just because we haven`t had a crash this year doesn`t mean that we don`t have a nervous market.

WAITING FOR THE `CORRECTION`

Last Friday the Dow was down 49 points at one point, but it recovered more than half of that before the close. Monday, stock averages were up again.

This must be frustrating to a lot of gurus.

Almost every day, The Wall Street Journal manages to find some analyst who is predicting a stock market ``correction`` -- the euphemism Wall Street uses to distinguish a slide from a crash.

A correction of 10 percent seems to be a popular prediction.

You can find some sound reasoning behind the predictions. For one thing, dividend yields have fallen to almost 3 percent, which is often an ominous signal.

The problem is that when most Wall Street analysts are predicting the same thing, it usually doesn`t happen. The crowd is usually wrong.

The perversity of the market was demonstrated again last week, when the Federal Reserve Board again cut the discount rate, the rate the Fed charges banks. Instead of going up, the market went down.

IS THE LIGHT GREEN YET?

The discount rate is an important signal, but I think the attention it got this time around was overdone. A green light can turn green just so many times.

The big news, I think, came last December when -- after holding the discount rate steady for most of 1989 and 1990 -- the Fed cut the rate for the first time in years. That was the signal to buy.

The market didn`t really react until mid-January, when the Allied aerial bombardment of Iraq proved so successful.

But people who bought in December have plenty of reason to smile. People who believe in such signs will wait to sell until the Fed arket of stocks. Every day, some shares go up and some go down.

Stocks that looked like dogs a few months ago seem to be looking a lot better today.

Witness shares of IBM, whose unexpected signs of life were chronicled in this space nine days ago. It continues to climb.

Portfolio managers wouldn`t take the stock on a bet when it was selling in the mid-90s; now that it has passed 100, they love it.

And imagine: These supposedly smart people are the ones who make the market.